Global Bond Rout Accelerates Amid Rising Oil Prices and Hawkish Fed
The global bond market experienced another day of turmoil on Tuesday, with Japanese yields reaching levels not seen in over 30 years. Investors are growing increasingly concerned that policymakers worldwide will be forced to raise interest rates to combat sticky inflation and lax fiscal policy.
Oil prices also rose sharply, fueled by the ongoing U.S.-Israeli war on Iran, further weighing on bonds and stocks. The S&P 500 fell 0.7%, while the Dow dropped 0.8% and the Nasdaq declined 1%. In Asia, major indices were narrowly mixed, with Europe slipping to a one-month low.
Japanese yields scaled key levels not breached for over 30 years, reaching record highs across the curve. The 10-year UK gilt yield reached its highest since 2008, while the 30-year yield hit its highest level since 1998. French and German yields also rose to multi-year highs.
Fed Governor Michael Barr added his voice to growing calls for interest rate hikes, indicating a hardening position within the Federal Reserve. Barr stated that if inflation doesn't moderate, the Fed will have to act 'decisively,' specifically mentioning the September 15-16 meeting.